Bogleheads Stay the Course

Bears and market volatility don’t scare these die-hard Vanguard investors.

Attendees watch a presentation at a conference of "Bogleheads"
(Image credit: George Korzeniewski )

On the morning of Thursday, October 13, as the Dow Jones industrial average plunged more than 500 points, a gathering of 370 investors and financial advisers—who were, as a group, losing tens of millions of dollars that very moment—calmly noshed on oatmeal and Danish. “Don’t just do something, stand there!” cheered the meeting’s speakers, quoting the inspiration of the conference, the late Jack Bogle, founder of Vanguard and early proselytizer of the index mutual fund. 

During a three-day conference at a Chicago-area hotel, the self-described “Bogleheads” did indeed just stand there. And sit there. Cell phones were muted. Nobody called their broker. Instead, on what turned out to be one of the most volatile days in the stock market’s history, they recalled Bogle-isms about ignoring short-term blips. Through presentations, meals and afternoon treats of ice cream sandwiches, they reassured each other that low-cost, long-term passive investing would eventually pay off better than chasing hot tips or panic selling. 

Their adages about patience, discipline, simplicity and bargain hunting may well strike a chord with any investor worried about today’s volatile investing environment.  

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Stay the course. Over the long term, the U.S. stock market has more than recovered from every bearish slump, notes Jim Dahle, a physician-turned-investing guru and author of The White Coat Investor. “I expect to live through 17 bear markets as an investor,” Dahle told the crowd. In October 1987, “the stock market had the biggest one-day drop ever, but it still finished positive for the year,” he noted. He summed up his advice with the title of one of Bogle’s books: “Stay the course.”

Bogle, who died in January 2019, founded Malvern, Pa.–based Vanguard in 1974. Two years later, he launched the first publicly available index fund, which followed the S&P 500 index. Wall Street professionals and money managers scoffed at what they called “Bogle’s folly.” Bogle stayed the course, and Vanguard’s low-cost index funds attracted a growing fan base because they generally out-earned expensive funds managed by professionals who actively tried to beat the market.

In 1998, a small group of cost-conscious investors who called themselves “Vanguard Diehards” formed a group chat on a Morningstar electronic forum. Two years later, 22 Diehards met Bogle for dinner at a member’s Florida house. The gatherings turned into annual events and grew in popularity. They became multiday Bogle-cons, featuring action toys (such as a Bogle bobblehead) and presentations by Morningstar analysts, popular investing authors such as William Bernstein (who wrote The Four Pillars of Investing and several other books) and Bogle-minded financial advisers.

By 2007, the group had evolved into Bogleheads. Discussion group leaders, including Taylor Larimore, a retired IRS officer and financial manager whom Bogle nicknamed “the King of the Bogleheads,” and Mel Lindauer, a retired graphics company CEO (dubbed “the Prince”), began publishing advice books including The Bogleheads’ Guide to Investing. One of the central tenets: Investors should just stick with a basic, low-cost, three-fund portfolio of Vanguard’s Total Stock Market Index (VTSAX), Total International Stock Index (VTIAX) and Total Bond Market Index (VBTLX).

At the most recent assembly, longtime Boglehead Allan Roth, a fee-only financial adviser based in Colorado, told attendees that the three-fund portfolio is his core recommendation because it is boring. Roth, whose Twitter handle is @Dull_Investing, says one reason a largely hands-off port-folio works is that investors who use it don’t go astray by chasing returns. Morningstar research has shown that individual investors tend to pour money into funds right after they’ve notched record gains, he says, and that means investors often end up buying fund shares at high prices-, which leads those investors’ personal returns to underperform the funds they invest in by an average of 1.7 percentage points a year. By putting your portfolio on autopilot, you “minimize expenses and emotions and maximize diversification and discipline, which means you lose less money than most other people,” Roth says. 

But many Bogleheads are also open to some market timing—as long as investors are buying low. “International stocks are a screaming deal right now,” Dahle told the group. The average holding of Vanguard Total International Stock was selling at a price-earnings ratio of a little more than 10 in early November. By contrast, even after the 2022 plunge in stock prices, Vanguard Total U.S. Stock Market holdings were selling at an average P/E of about 16. 

The drop in Treasury bond prices in 2022 has created an opportunity for safety-conscious investors to lock in higher yields and decent long-term returns, Roth says. Long-term Treasury inflation-protected securities recently yielded more than 1.5% above the inflation rate. Putting a portion of your portfolio in TIPS is a great way to diversify and protect your retirement savings, he says. That’s especially apt now, when he worries that U.S. investors have become used to what some have called “teddy bear” downturns, in which stock prices tend to rebound quickly. But “grizzly bears” could be lurking—perhaps even now, says Roth. “I’m a pessimist.” 

Cheap, boring and sexy. The focus on simplicity and safety is what attracted Maggie Oldham, a Nashville-based nurse, to her first Boglehead convention this fall. Oldham, who had never read any of Bogle’s books, says she spent the first 40 years of her life in a “financial coma,” paying too much for everything from her mortgage to investments. Whenever she’d talk to friends or relatives about investing, they’d suggest “you should see my guy”—typically a commission-based broker who often pushed expensive or complicated strategies. Searching online led her to several “financial independence” proponents. Some of them recommended the Boglehead books and website.  

After reading and interacting with the forum (and putting her taxable savings in the three-fund portfolio),  Oldham had finally found her tribe. At home, her focus on simple saving and investing makes her feel like a bit of a loner. But at the Boglehead conference, she says, “I fit right in—and I got validation that I am on the right path for me.” By the end of the conference, Oldham was strategizing ways to talk up Boglehead values in Nashville to help create a community and “make it sexy to be cheap and boring,” she says. 

Rick Ferri, an hourly-fee financial adviser who is the president of the group that held the conference, the John C. Bogle Center for Financial Literacy, warned the attendees that not all investors they meet will be kindred spirits—at least not right away. But the markets that week seemed intent on converting at least a few. After a Thursday morning federal data release confirmed continuing high inflation, the stock market opened down more than 2%. For some reason, that set off a buying spree that pushed the overall stock market up about 5% by the close of trading. The next day, most of that gain disappeared. By the time the Bogleheads’ planes landed in their hometowns on Friday, much of their portfolio holdings were also back home—at almost exactly the value they’d been at the start of the week.

Kim Clark
Senior Associate Editor, Kiplinger's Personal Finance

Kim Clark is a veteran financial journalist who has worked at Fortune, U.S News & World Report and Money magazines. She was part of a team that won a Gerald Loeb award for coverage of elder finances, and she won the Education Writers Association's top magazine investigative prize for exposing insurance agents who used false claims about college financial aid to sell policies. As a Kiplinger Fellow at Ohio State University, she studied delivery of digital news and information. Most recently, she worked as a deputy director of the Education Writers Association, leading the training of higher education journalists around the country. She is also a prize-winning gardener, and in her spare time, picks up litter.